Municipal Bond Forum
Some states prohibit cities from declaring bankruptcy
Q
Are there some states that prohibit their municipalities from declaring bankruptcy? If so, which states, and what alternatives do such municipalities have when faced with adverse economic conditions?
A
James A. Klotz responds:
States that do not statutorily allow for Chapter 9 filings include: Alaska, Delaware, DC, Georgia, Hawaii, Illinois, Indiana, Kansas, Maine, Maryland, Massachusetts, Mississippi, Nevada, New Hampshire, New Mexico, North Dakota, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia, Wisconsin and Wyoming.
The alternative is to find a way to balance their budgets. Often this can be done by reducing services or in the case of San Jose and San Diego, by scaling back pension benefits.
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